Day traders generally use an easy to follow trading plan that can be implemented quickly and with maximum efficiency. Swing trading differs from day trading primarily in the fact that positions can and are often carried for a longer time frame than a day. The swing trading strategy can be described by the classic trading maxim of “Buy low and sell high” as the swing trader aims to profit from both trend following moves and subsequent corrections.
Swing traders often use technical analysis to identify key support and resistance levels on price charts to determine the best levels to initiate and liquidate trades. Both strategies will work consistently for some traders and not for others, and both have their advantages and disadvantages. Today’s Day Trader StrategyOne of the most common and destructive mistakes a day trader makes is to simply not follow their plans.
The 5 Stages of TradingPsychologists have created a model for assessing how people change their behavior. This allows for the trader to watch their open positions when the market is most active and to take advantage of optimum trading opportunities and close unprofitable positions promptly.
In addition, limiting trading to a set time frame during the day effectively eliminates overnight risk that can result in sharp, sudden moves while the trader is not watching the market.
Overnight risk only becomes an issue when swing traders carry positions for more than one trading day.
Each strategy works well for some traders and is generally only as good as the trader implementing it.
The key to success over the long term usually lies in the quality of the trading plan that the trader formulates to implement the strategy. Temptation, an “obvious signal”, and just simple greed can lead traders down the road of being undisciplined.
Once the price has broken out of a trading range, the swing trader will often take a position in the direction of the breakout. This is without a doubt one of the most dangerous mistakes, as traders will often lose more than they originally planned as they raised their amount risked.
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